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The e-tailer will also have to create 2,500 jobs in the state and make at least $200 million in capital investment in Texas over a four-year period

Amazon spent much of 2011 fighting tax-related battles in select U.S. states, claiming that it could not be forced to collect taxes on online sales without some sort of set standards. But Amazon is changing its tune in Texas, as it has agreed to start collecting taxes on online sales in the state starting this summer.

After more than a year of fighting with the state of Texas, Amazon has reached a settlement with Texas State Comptroller Susan Combs regarding $269 million in uncollected sales taxes on online items. The deal states that Amazon will begin collecting taxes on online sale items starting July 1, 2012 and that the e-tailer will create a minimum of 2,500 jobs. Amazon will also have to make at least $200 million in capital investment in Texas over a four-year period.

“While we continue to believe the assessment was without merit, in April 2012, we entered into a settlement with the State of Texas that included an agreement to collect sales taxes on applicable sales transactions for our US-focused internet retailers beginning July 1, 2012, resolution of Texas sales taxes up to that date, certain commitments related to capital investment and job creation in the state, and an immaterial payment to the state," said Amazon.

Amazon has been going to head-to-head with Texas over tax issues since February 2011. At that time, Combs told the online retailer that it was responsible for $269 million in sales taxes that were not collected on online sales in the state.

Amazon said that it does not have to collect sales taxes on items sold online because of a 1992 Supreme Court decision that excuses Amazon and other remote sellers from having to collect taxes in U.S. states that do not have the company's employees or warehouses operating within those states. While Amazon had a suburban Dallas distribution center in the state of Texas, it said that this was not enough of a physical presence to justify the collection of taxes.

After Combs pinned the $269 million in unpaid taxes on Amazon, the e-tailer announced that it was closing its suburban Dallas distribution center and canceling operation expansions in Texas.

"We regret losing any business in Texas, but our position hasn't changed; if you have a presence in the state of Texas, you are required to pay sales tax just like any other business that has a presence in Texas," said Allen Spelce, a spokesman for Combs.

But now, Amazon and Combs have struck a deal and are working toward federal legislation for set standards on the collection of online sales taxes.

“Amazon looks forward to creating thousands of new jobs in Texas and we appreciate Comptroller Combs working with us to advance federal legislation,” said Paul Misener, Amazon Vice President of Global Public Policy.  “We strongly support the creation of a simplified and equitable federal framework, because Congressional action will protect states’ rights, level the playing field for all sellers, and give states like Texas the ability to obtain all the sales tax revenue that is already due.”

Texas isn't the only state that went after Amazon for online tax collection. Last year, Senator Dick Durbin (D-Ill.) introduced a bill called the Main Street Fairness Act, which would require all businesses, including those online, to collect sales taxes in the state where the consumer resides.

Amazon also ran into trouble with New York, where Amazon filed a lawsuit and lost in 2009 over a dispute concerning the collection of taxes from out-of-state transactions through the online retailer.

California was another U.S. state that pushed Amazon away last year when it introduced an online sales tax bill that would require the e-tailer to collect. Amazon threatened to terminate contracts with all California residents in the Amazon Associates Program because it believed the new bill was unconstitutional. Later, Amazon asked California voters to repeal the new sales tax law and even offered the state 7,000 jobs to put the tax law on hold.

Currently, Amazon only collects sales tax in Kansas, Kentucky, New York, North Dakota and Washington. Starting July 1, Texas will be added to that list. Amazon also agreed to start collecting sales tax on online items in California starting next year, and in Arizona in 2014.

Source: GeekWire

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By Tequilasunriser on 4/30/2012 10:41:58 AM , Rating: 5
The beginning of the end.

RE: :(
By AMDftw on 4/30/2012 10:42:12 AM , Rating: 2
Well I guess I won't buying anymore items off Amazon. I live in Tx. :( They should have chosen CA, MA. :P

RE: :(
By Flunk on 4/30/2012 11:05:54 AM , Rating: 2
You're not going to have a choice. There will soon be no way to evade the sales tax.

RE: :(
By cigar3tte on 4/30/2012 11:22:46 AM , Rating: 2
Until then, I will keep buying from retailers who have the cheapest prices, which likely won't be Amazon when taxes are added (for high-value items of course).

RE: :(
By ChuckDriver on 4/30/2012 4:11:14 PM , Rating: 2
Other than move to Delaware or New Hampshire.

RE: :(
By kmmatney on 4/30/2012 10:51:59 AM , Rating: 4
I think this was inevitable. The states are losing out on too much tax money. They've lost out on several hundred dollars from me alone over the past year. I hope that they eventually have a flat tax, rather than have the taxes change with every state.

RE: :(
By bah12 on 4/30/2012 11:49:28 AM , Rating: 3
I won't beat a dead horse, but the problem is not online sales, it is tax evaders such as yourself (and me). The law is really quite clear, the buyer owes the tax regardless of whether the seller pays it on their behalf. But very few of us actually account for and pay sales tax on out of state purchases.

It is just far more politically safe to go after big bad Amazon, than sue a few million of your voters for tax evasion.

As for me I'll still buy off of Amazon if the price is right.

RE: :(
By acer905 on 4/30/2012 12:36:33 PM , Rating: 5
Its actually a much more complex problem than just that. First off, one state has no constitutional right to tax any goods from other states. It actually violates laws on the federal level set in place to regulate interstate commerce.

Now, this neatly applies to physically going to a different state, buying something, and returning. In that case, the goods have either been taxed, or not, based on the laws of that state. The state you return to has no ground to stand on demanding tax on those goods, so you have nothing to worry about.

Now for the monkey wrench. Nexus laws set up to encourage mail order sales. Because there are simply too many different sales tax laws and zones, it was deemed by the US Supreme court that if the seller has no physical presence in a tax zone, it does not need to collect and report sales tax from people in that zone. The problem is that this extended to internet sales, and the internet sellers became quite large. So, what was the solution?

Use Tax: "use tax n. a state tax on goods purchased in another state for use in the taxing state, to make up for (in lieu) local sales tax. Example: Bill Buyer who lives in California (which has a sales tax) orders a freezer from a company in a state with no sales tax. California will attempt to charge a "use" tax equivalent to its sales tax."

Now, the problem is that a use tax is all encompassing. If you physically drive somewhere, buy an item, and come back you still need to report it due to the way that many states word their laws. So, you could be paying the same taxes twice. This in turn makes the law unconstitutional.

Amazon caving in will cause a snowball effect. Now, it sets the precedent that online retailers are exempt from the Nexus laws, so even individual sellers and small buisnesses will have to start collecting as well. This may have a seriously negative impact on the internet economy as a whole.

((And they will never sue millions of people because they know that if challenged, the laws will not stand. Better to hope some gullible fools follow the system than do something which would cause it to crumble))

RE: :(
By bah12 on 4/30/2012 4:38:17 PM , Rating: 4
Agreed, 100%. But my point still stands current use law has not been ruled unconstitutional (for mail order/internet that is), thus we still owe it until then. Unfortunate but true.

It is not a popular view for sure, thus my quick down rate, but from a legal perspective I certainly owe my state tax for goods I've purchased over the internet. Don't get me wrong, I don't pay it either, and I hope the refine it, but the law is pretty clear with regard to items not physically bought in another state. Ill-advised and utterly unenforceable, but still there nonetheless.

RE: :(
By foolsgambit11 on 4/30/2012 6:50:14 PM , Rating: 2
Maybe I'm refusing to pay it, hoping to be slapped with a fine so I will have standing to bring a case challenging the law's Constitutionality. But I'm not, since I live in WA, and have paid sales tax on Amazon for a long time.

RE: :(
By Solandri on 4/30/2012 8:59:48 PM , Rating: 2
Broadly speaking, a tax which costs more money to enforce than the revenue it brings in is a bad idea. That's the problem with a use tax. Unless you require everyone to report every sale, every trade, every transaction over (say) $20 to the government, enforcement is going to be non-uniform and prohibitively expensive. It has the effect of turning everyone into tax cheats, opening up the doors to government having the power to arrest and charge you whenever they feel like it, whenever you tick them off.

You can accomplish the same thing as a sales tax by simply raising the income tax, and giving tax credits for uses of money which currently don't have sales tax (food, clothing in some states, putting into a savings account, paying utility bills, etc).

RE: :(
By Theoz on 4/30/2012 1:13:01 PM , Rating: 2
Any other honest saps here that pay the use taxes for all tax-free online goods on your state tax returns?

You are still responsible for state sales tax (in the form of a use tax) regardless of whether Amazon charges it or not. Use taxes on tax-free online goods are still cheaper than sales tax in my area (6.5% vs. 10%), so I still come out significantly ahead when buying online vs. brick and mortar.

RE: :(
By Solandri on 4/30/2012 2:41:24 PM , Rating: 2
That's really tangential to the issue here. The real issue is that if States want to work around the Constitutional ban on taxing interstate commerce, they need to get together and pass a Constitutional Amendment doing it.

Yes that's hard, but it's the proper way to do it. Singling out private businesses and individuals for tax judgments based on laws of indeterminate constitutionality is just bad for everyone. You're not getting money from them with the threat of law, you're getting it from them with the threat of causing them to burn money in court, where often even the legal winner is a financial loser.

RE: :(
By Samus on 4/30/2012 2:01:21 PM , Rating: 1
Of the categories of tax states' collect, sales tax is almost always one of the smallest portions. Some states like Oregon have no sales tax.

Property tax, income tax, and "excise" tax (utility taxes, gas taxes) are always the primary revenue generators. Here in Illinois, sales taxes account for <10% of collected taxes. In Chicago, which adds an additional 3.5% to the state tax (6.5%) making the sales tax in Chicago 10% on general goods, sales taxes account for 3% of city revenue.

Basically my point is, with all the inconvenience, systems and agencies involved with sales tax with such little return, why bother? Just tax us somewhere else more convenient so I don't have to carry around a ton of collected change throughout the day.

RE: :(
By cknobman on 4/30/2012 3:15:10 PM , Rating: 2
Amazon will have 1 less customer.

Unless Amazon's price (including tax & shipping) is still less than a competitor who does not collect tax price (including shipping).

I will always buy from the place offering the cheapest TOTAL cost.

RE: :(
By jimbojimbo on 4/30/2012 3:50:37 PM , Rating: 2
The thing is with this precedent Texas will go after EVERY online retailer that they feels owes them tax money so you won't be able to buy anything without paying sales tax.

Eventually you'll be back to Amazon.

RE: :(
By bah12 on 4/30/2012 4:46:00 PM , Rating: 2
You missed the point, the only reason TX had any leverage was that Amazon indeed did have a physical presence. I always found it's assertion that it wasn't enough, laughable.

So your assumption is wrong, if for example has literally no physical property in TX, then TX does not have a leg to stand on. That was not the case with Amazon. They had a warehouse for Pete's sake! When your entire business model relies on a vast network of warehouses, and you claim the one in TX "doesn't count", guess what chances are that isn't going to fly. Amazon knows this or they wouldn't be settling, they threw the dice and came up snake eyes, pay your bet and move on.

RE: :(
By retrospooty on 4/30/2012 5:37:23 PM , Rating: 2
Yup...same story here in AZ. There is a huge Amazon depot here, and the state is trying to get several hundred million dollars from Amazon and will likely take it to court. My hope? Amazon just leaves the state. You want to charge us? OK, buy bye. How do you like 10,000 less jobs to help your gross budget deficit now?

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